call option, provision or right
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| A lender’s right to demand payment of the outstanding balance of a loan at a time or under circumstances specified in advance in the loan agreement. The most common example is when a lender is allowed to demand payment of the outstanding balance of a mortgage if the agreed-upon mortgage payments are not made. |
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cancellation clause
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| A clause in a contract, such as a mortgage, that sets forth the conditions under which each party may cancel or terminate the agreement. |
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cap
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| A limit. A cap is important in adjustable-rate mortgages, where it represents the limit on how high payments may go or how much the interest rate may change within a given period or over the life of the mortgage. |
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cap rate
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| An abbreviated term for capitalization rate, which is a way of calculating the value of income property by determining present income and multiplying it by a multiple that is universally acceptable to buyers of similar properties in the same area. For instance, if the net income of an apartment building is $200,000 a year and a multiple in common use in the area in which the apartment building is located is 10, the apartment building can be said to be worth $2 million. |
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capacity of parties
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| The legal competence to sign and, more importantly, be bound by a contract. A person might lack capacity for a variety of reasons, such as being a minor, being mentally challenged, or not being of sound mind. If a person lacks capacity, any contract that person signs is not legally binding (i.e., is not valid). |
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capital asset
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| Any property to which the tax rules of capital gains and capital assets applies. |
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capital expenditure/improvement
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| Money that is spent to improve a property and thus enhance its value, excluding repairs. Such expenditures may include building a new garage and adding a room to a house. |
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capital gain
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| An increase in the value of capital property (i.e., property other than a principal residence) on which tax is payable, usually upon sale of the property. |
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capital loss
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| A decrease in the value of capital property (i.e., property other than a principal residence), which the owner may use against capital gains or against regular income when paying his or her taxes, depending on the tax rules. |
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capitalization rate
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| see cap rate. |
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